Hawaii Island’s exuberant real estate market and a new tax on transient rentals could be enough to keep county finances out of the red despite increased spending, as administrative money crunchers work on the first stab at an annual budget by March 1.
With just over a week to go before the preliminary proposed budget needs to be presented to the County Council, the Finance Department still doesn’t have a good handle on how much property values will increase — the best indicator of whether a tax increase would be necessary. In the current housing market, likely not.
Islandwide, home prices increased 17% from 2020 to 2021, according to Multiple Listing Service Data.
Regardless whether it’s the property value or the tax rate that goes up, taxpayers would still feel the hit. The budget year runs from July 1 to June 30.
“Property values follow the market and they are up as compared to last year,” Real Property Tax Administrator Lisa Miura said Thursday.
The county is also trying to anticipate how much a new 3% local tax on transient accommodations will bring in. That imposes an added tax on hotels and resorts, but it also includes a tax on timeshares, bed and breakfasts and transient vacation rentals such as Airbnb rentals.
The tax went into effect Jan. 1, with the first payments due to the county on Tuesday. Details are at www.hawaiicounty.gov/tat.
The local transient accommodations tax is intended to make up for $20 million lost from the budget when the state took the counties’ previous share of the tax for its own use.
The County Council last year, relying on federal money from the American Rescue Plan and increased property values, approved a $610 million budget, a 4.1% increase over the prior year.
In this age of COVID-19 uncertainty, it’s hard for the numbers-crunchers to crunch as accurately as they would like on either side of the ledger.
Some expenses are largely outside the county’s control, like the cost of employees, including salary and wages, fringe benefits and retirement.
The state-level public employee negotiations have struck a deal with the United Public Workers bargaining Unit 01, representing about 6,000 blue-collar workers, that could set trend for the other unions that seek renegotiation of their contracts.
UPW workers will receive a lump-sum $1,000 each to all employees who were employed full-time as of June 30, 2021, followed by 3.72% raises Oct. 1, of this year, and 5% in July of each of the two following years, under the agreement ratified by union members.
The council will hear in-depth budget presentations from the various departments over three intensive days in mid-April.
The county administration, meanwhile, is dipping into its roughly $20 million fund balance — the money budgeted but not spent in prior years — to cover unexpected costs from $1.4 million in worker’s compensation to $255,000 for parks equipment. In all, the price tag is $3.2 million, which the County Council is expected to approve on second reading Wednesday.
“There were some unusually high costs in the current year. This is by far not a normal year,” Finance Director Deanna Sako told the County Council on Feb. 9. “None of us really knew the full extent of the supply chain issues and the demand issues we were going to see so we definitely had some issues.”